Research On Selecting M&A's Target Firms Based On Synergistic Effects

M&A (merger and acquisition) is a deal form of property rights which purpose is to obtain other enterprise'control rights in market environment. M&A is an efficient form of outstretching enterprise's scale and an important means of reallocating social resources. But there are over 50% M&A activities are failure in practice and the chief reasons are selecting target firms incorrectly. Up to now, though there are a lot of literatures on M&A, but most of of them are about target firms'evaluation after being purchased.There aren't systematic theories and methods on how to select target firms, how to screen target firms and how to realize the most M&A's gains. On researching contents , the present literatures haven't been directed by synergistic effects theory in all stages of selecting target firms on how to analyze M&A'value-added; On researching methods, optimal search theory, game theory and Set Pair Analysis theory have just been applied in present M&A'research. The above reasons result in lacking theoretic and practical directions of selecting target firms and reduce the successful ratio of M&A activities. For this reason, selecting correct target firms and improving successful ratio of M&A activities have theoretic and practical significance.The purpose of the dissertation is to provide judgement and direction for the buyer before M&A deals in terms of the buyer's development strategy. The dissertation'contents are about core problems of selecting target firms, that is, how to search target firms, identify and evaluate target firms and price with target firms based on synergistic effects theory. The main contents of this dissertation are as follows:1. Establishes target firms selecting framework based on synergistic effects. First, this dissertation sums up present M&A motives theory and analyses the inherent relationship between synergistic effects theory and other theories of M&A motives; After that, this dissertation researches occurrence mechanism of management synergistic effects, operating synergistic effects and financial synergistic effects,and analyzes synergistic effects'function in creating M&A value; On base of these, this dissertation researches the relationships between synergistic effects and target firms selecting and establishes target firms selecting framework based on synergistic effects.2. Researches target firms'search systematically. This dissertation analyzes the contents and ways of searching target firms, studies the distinguishable characteristics of target firms on the basis of information economics principles and concludes financial characteristics of target firms. After that, this dissertation gives affecting factors of external searching environment and internal searching capacities;At last , the dissertation establishes a model of searching target firms to decide the best searching times based on fixed samples method of optimal searching theory in order to get the most synergistic effects and analyses exsistence of the model'solution and searching restraints.3. Gives identifying methods of management synergistic effects, operating synergistic effects and financial synergistic effects according to their occurrence mechanism. That is, identifying management synergistic effects by Katzs model, identifying operating synergistic effects by value chain model and identifying financial synergistic effects by Boston Matrix; After analyzing components of synergistic effects ,the dissertation establishes a new index system of evaluating target firm based on synergistic effects. This dissertation analyzes the synergistic degree with the unity thoughts of Set Pair Analysis theory and evaluates target firms from multi- hierarchy.4. Gives the negotiation ideas of both sides and the pricing tactics by building the game theory model. The optimal judgments and tactics combinations were given on Bayesian Nash Equilibrium when the pricing right was in different negotiator's hands. On the basis of above, the effects of pricing right to the M&A income of both sides were studied and negotiation tactics based on pricing right were given for buyer.5. Case study. The main theories and methods put forward by this dissertation are applied in the typical case of Tai Ji Group buying South-west Pharmacy, especially the game theory model based on pricing right established by chapter 5. The model explains two quoted prices given by South-west Pharmacy, and explains the reasons why Tai Ji Group refused the first quoted price and accepted the second quoted price. This dissertation also analyzes the negotiation tactics of both sides. The case proves the effectiveness of theories and methods put forward by this dissertation.This dissertation provides theory bases and practical supports to select correct target firms and improve successful ratio of M&A activities .